First off, I am not changing the focus of this blog to meat and meat by-products, although that would be a pretty interesting blog come to think of it.
Earlier this week, the U.S. Court of Appeals for the District of Columbia Circuit issued an en banc opinion in the appeal of American Meat Institute v. U.S. Department of Agriculture, upholding a Department of Agriculture rule requiring “country of origin” labeling for meat products. The outcome of this case may give the SEC some hope that the Court will reverse the three-judge panel’s holding that the Dodd-Frank Act conflict minerals disclosure rules violate the First Amendment in National Association of Manufacturers, et al., v. Securities and Exchange Commission. This is because a central issue with regard to the standard for review in the National Association of Manufacturers case was also at issue in American Meat Institute.
In American Meat Institute, the en banc court reheard the case in order to interpret a 1985 Supreme Court case, Zauderer v. Office of Disciplinary Counsel, on the issue of compelled commercial speech. The Court considered whether the government can only require disclosures when its aim is to prevent deception, or whether it has broader authority that would cover other types of speech. In Zauderer, the Supreme Court held that rational basis review applies to certain disclosures of “purely factual and uncontroversial information,” but the DC Circuit had previously limited Zauderer to situations where disclosure requirements are “reasonably related to the State’s interest in preventing deception of consumers.” The opinion in American Meat Institute took a broader interpretation, indicating that Zauderer actually extends beyond situations involving deception, so as to encompass the meat labeling disclosures that were at issue in that case.
In National Association of Manufacturers, the three-judge panel found that the rule violates the prohibition against compelled speech. The panel held that “[b]y compelling an issuer to confess blood on its hands, the statute interferes with that exercise of freedom of speech under the First Amendment.” This sort of disclosure, the panel reasoned, was similar to requiring issuers to “disclose the labor conditions of their factories abroad or the political ideologies of their board members” which would be “obviously repugnant to the First Amendment” and should not face a relaxed standard for review just because Congress used the “securities” label. Given the revisiting of the DC Circuit’s interpretation of Zauderer in the American Meat Institute opinion, that outcome now could change, although there are certainly distinctions between the two cases. Now, it just remains to be seen what will happen to the SEC’s request for a rehearing of National Association of Manufacturers en banc by the DC Circuit.
More on Cybersecurity: PwC and IRRC Report on Opaque Disclosures
A report released this week by PwC and the Investor Responsibility Research Center Institute indicates that while companies must disclose significant cyber risks, “those disclosures rarely provide differentiated or actionable information.” The report goes on to examine key cybersecurity threats to corporations and provides information to investors for the purpose of evaluating investment risk, business mitigation strategies, and the quality of corporate board oversight.
Our August Eminders is Posted!
– Dave Lynn